Car insurance is a legal requirement, even if the car isn’t being used. The only exception is if it’s been officially declared ‘off the road’ with the Statutory Off-Road Notice (SORN).
How the system works
Insurance costs are based on a combination of data and statistics that have been converted into a banding system.
Every passenger car sold in the UK falls into one of 50 insurance bands: the higher the band number, the higher the insurance premium.
Insurers meet every month to review the vehicles in each band. The categorisation of each car reflects a mix of ‘specification’ data (engine size, performance, initial purchase cost etc) and ‘real-world’ data (the statistical probability of claims being made by owners, and the cost of repairs resulting from those claims).
Repair costs account for more than half the money paid out through insurance claims. Premium manufacturers charge premium prices for both parts and labour, so their products fall into higher insurance bands than cheaper, low-specification models with smaller engines.
You can find out the insurance band for any car in the reviews at whatcar.com.
There are three types of insurance cover, offering different levels of cover – and different costs.
This is the most basic type of cover, and the minimum legal requirement for car insurance. It covers your passengers, the other vehicle and its occupants, and property, but it doesn’t cover damage to your own vehicle. So, if the accident was your fault, you have to pay for your own repairs. If it’s not your fault, you need to claim against the other driver’s insurance policy.
Third-party cover is usually taken by owners of older vehicles whose value is less than the cost of any likely repairs. Newly qualified drivers go for third party insurance, too, because they believe it will be the cheapest option. In fact, because insurers price for risk, and claims statistics show that new drivers are more likely to be involved in an accident than those with more experience, the cost of third-party cover has increased significantly in recent years. It can often be more expensive than more comprehensive policies.
Third party, fire and theft
Stepping up from third-party insurance, this type of policy adds cover for your vehicle if it’s stolen, damaged or destroyed by fire, but it still won't cover your own costs if the accident was your fault.
Three-quarters of UK drivers opt for fully comprehensive motor insurance. As the name implies, it covers pretty much everything, including you, your vehicle and your passengers, as well as the other driver, vehicle and passengers, and damage to any property. It will also provide cover if your car is stolen, damaged or set alight, and insure you to drive other vehicles.
The level of cover varies between insurers, though. Some policies might not include legal, breakdown or even windscreen cover, or a courtesy car. Adding these 'perks' on to the policy could easily add £50 to the premium quote. Scour the small print thoroughly to ensure you don't get caught out.
How to cut your insurance bills
According to the AA, insurance premiums now average around £900 a year. A car’s insurance banding heavily influences the size of its insurance premium, although insurers also take other factors into account. Attending to the following can help keep your premium to a minimum.
There are five levels of damage used by the insurance industry to describe cars that have been involved in accidents. These levels, or categories as they’re more commonly known, are labelled as A, B, C, D and F.
Cat F refers to a vehicle that has suffered fire damage. The other four ‘Cats’, A to D, all relate to cars that have had various levels of crash damage, and that are registered as such.
Cat A is the worst of the four, where a vehicle is so damaged that it cannot even be used for salvage and should be crushed.
Cats B and C mean that the vehicle has been heavily damaged and the insurance company has chosen not to go ahead with the repairs. Cat C cars are usually capable of being salvaged if the repairs are carried out correctly.
Cat D is the least serious category. It usually means that the vehicle has suffered light damage but the insurance company’s decision to repair it is dependent on the cost of the repairs and the value of the vehicle.
If you’re buying a Cat D car, there’s no guarantee that it hasn’t incurred chassis damage. You can find out for sure by investing in a full mechanical inspection at an approved dealership, or by RAC Inspections.
If you buy a Cat D car, make sure your insurance company knows about it, otherwise they might not pay up on any claim.
What to do in an accident
Car accidents are a fact of life. Thankfully, your chances of walking away unhurt are higher than they’ve ever been, thanks to the superb occupant protection provided by even the most affordable modern cars – but there’s no escaping the legal process that’s kicked off by many accidents.
There are some important things you have to do at the scene of an accident. Firstly, never leave the scene - that’s a criminal offence. If you bump a parked car, and the owner is nowhere to be seen, you’re legally obliged to leave a note with your contact details on the windscreen.
If somebody has been injured, you must call the police. If it looks in any way serious, make sure an ambulance is on the way, too.
Once these priorities have been attended to, it’s time to collect some data. Besides noting the full name and address of the other party involved, and their vehicle’s registration number, you should also get contact details from any eye-witnesses.
You and the other party will need to swap insurance company details – their names and addresses, and policy numbers if available. Make a note of any statements made at the scene by any of the parties, and pass that information on to your insurer. In the emotion of the occasion, it’s all too easy to talk about whose fault the accident was. Don’t do it. If you do, you could create problems for your insurers – and, by extension, you – in the handling of your claim.
If you’ve had an accident, telling your insurers about it as soon as possible is a condition of your policy, even if you don't intend to make a claim. The other party may well do.
How to make an insurance claim
Making a motor insurance claim isn’t technically difficult. It’s mostly a question of getting the details right, because they’ll determine the success of your claim, and then keeping on top of the process.
Note down and, if possible, photograph everything that happened in the accident – its location, the weather, and the circumstances leading up to it – while events are still fresh in your mind. If you're claiming for a car that's been stolen, take a shot of where it was last seen.
If your claim involves a criminal offence, such as theft or vandalism, contact the police before touching anything, and make sure the police give you an incident number. You’ll need this number to register the claim with your insurer.
Inform your insurer – and be organised
Once you’ve contacted the police, phone your insurer as soon as possible, following that up with a confirming letter. Note down the name of the person you speak to, and the times and dates of any conversations.
It’s tempting to do everything by telephone these days, but insurance claims are one area where it’s really worth using more old-fashioned methods of communication.
Having some notes to hand when you make that first call not only allows you to give a fuller and more accurate account of what happened, it will also help you to keep your side of the story consistent as the claim progresses. Having facts written down for easy repetition when necessary will stop any tendency for the insurer to doubt your claim. It should also speed up the claims process, and your payout.
Writing letters and keeping hard-copy records of all your dealings with the insurer, the police and any garages or other parties related to the claim (including telephone calls) might seem like a pain. However, in a potentially long-running procedure where different parties have different views, and memories become fuzzy, being able to refer to specific statements made along the way really adds to your credibility.
Few of us haven’t heard the line ‘this call may be recorded for training purposes’. You can use this to your advantage if you keep a note of dates and times of phone calls. Many insurers can provide you with a reference number for each individual telephone conversation, and the name of the person who took the call.
Some insurers will agree to pay for repairs carried out by approved garages only, so don’t take matters into your own hands by having the car fixed yourself. Wait for the insurer to contact you with instructions. Otherwise you could end up paying for the repairs out of your own pocket.
Know your rights
In certain situations, insurers are entitled to refuse to pay out on your claim. If that happens, or if you feel the payout is unsatisfactory, you can appeal.
Try the insurer first to see if it will review its decision. That’s unlikely to happen unless you have new evidence, but you still have to do it. The law says you have to give an insurer at least eight weeks to respond to your complaint before you take it to the Financial Ombudsman Service (FOS). If the FOS decides in your favour, it can order the insurer to increase your payout or offer you compensation.